Eli Lilly looks to China for growth

MartinVaughan

(MarketWatch) -- Drugmaker Eli Lilly and Co.
LLY, +0.56%
will continue to build its business in China, even as it faces challenges ranging from intellectual property theft to a bias in medical benefits schemes against brand-name medicines, Chief Executive John Lechleiter said in a recent interview.

Lilly has to work to ensure that its groundbreaking medicines are "fairly represented" on national and provincial-level drug formularies in China, he said.

"In the face of lots of local generic companies, and in the face of a heritage of Chinese traditional medicines, (China) is an interesting if somewhat challenging marketplace," Lechleiter said.

Lilly is looking to emerging markets like China to drive revenue, even as patent expirations on some of its top-selling drugs, such as the anti-psychotic Zyprexa, are expected to drag on sales in the developed world. More generally, Lilly is one of several Western pharmaceutical firms that see China as a linchpin of growth in coming years, due to patent expirations and a slowdown in government reimbursements for prescription medicines.

In the third quarter, the firm saw revenue grow in China by 31%, compared to 9% worldwide.

While the firm is also targeting markets in South Korea, Taiwan and Australia, China and Japan "are clearly our focus in Asia," Lechleiter said.

Lechleiter was one of a group of CEOs of multinational firms that met with Chinese President Hu Jintao on the sidelines of the Asia Pacific Economic Cooperation summit in Hawaii this month. He said China has shown "remarkable progress" in anti-counterfeiting efforts, though he acknowledged that intellectual property theft remains a problem.

"The importance of intellectual property protection is understood by the highest levels of government in China," Lechleiter said, adding that officials realize stronger enforcement will be needed to protect China's own nascent industries.

The company is also pressing Chinese authorities for more timely regulatory approval of innovative drugs, he said.

One of the results of China's rapid economic growth is that its population is grappling more with the chronic illnesses that afflict prosperous societies, such as diabetes, heart disease and cancer.

"That plays into our strengths, and it means that we can expect to succeed with a portfolio of medicines in China that will look very similar to or the same as medicines that we have elsewhere in the world," Lechleiter said.

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